Question

To help you reach a $16,000 goal 8 years from now, your father

offers to give you $4,000 now. You plan to get a part-time job and
make five additional deposits, one at the end of each year. (The
first

Answer 1

The student's question deals with compound interest and saving for future financial goals. Using a compound interest formula, the question demonstrates the growth of an initial investment over time. It implies the importance of starting to save early and the impact of interest rates on savings.

Step-by-step explanation:

The student is asking about a financial planning scenario involving saving money to reach a goal of $16,000 eight years from now with an initial investment and future deposits. This question pertains to compound interest and the strategy of starting to save early to maximize growth of an investment over time.

Using the formula for compound interest, one can determine the future value of an investment. Compound interest can significantly increase the value of initial savings, as demonstrated by the example given: a $3,000 investment at a 7% annual rate of return becoming $44,923 after 40 years.

To work out the exact amount that the student needs to save annually, additional information such as the interest rate applicable to the future deposits is needed to apply the future value of an annuity formula.